Many companies who ship freight make costly mistakes when handling freight claims. There is a specific process that must be followed to ensure that the carrier involved pays the freight claim. If the shipper, or consignee, do not follow this process, the carrier will have an “out” and not pay the claim.
8 Freight Claims Tips to Ensure the Claim Gets Paid
1. Take Immediate Action & Record the Damage
Make a note of any damage or shortages on the Bill of Lading (BOL) all exceptions should be noted. Just because an exception is noted on the BOL doesn’t mean you have to file a claim. However if there are no exceptions noted, your claims representative will be in a very difficult situation to successfully collect on any claim.
Example of an exception is “one box damaged”. A claim would only be filed if damage was actually found to the product.
In the LTL world there are provisions for hidden damage but this is still difficult to win. A good receiving clerk notes all irregularities on any shipment.
When your freight is lost or damaged upon arrival, it is important to give attention to the issue immediately. Lost time can really hurt you here, and there is often more to lose, such as a customer, than simply the product or cost to produce the freight. Noting the problem on the Bill of Lading is very important. Use as much detail as possible from the beginning of a potential claim. If you have a camera or smartphone handy, take digital pictures right away and immediately make a call to the carrier or freight logistics company to make the parties involved aware of the damage or loss. The carrier has a legal right to have the value of the claim mitigated where possible. If you don’t give the carrier the opportunity in the beginning to salvage, re-deliver, or return the goods, then some or all of your claim may be denied on the basis that you did not mitigate the value of the claim.
2. Keep the Freight!
Never discard the damaged freight until the claim has been resolved to satisfaction. We are not saying keep it in your warehouse in secret, as the carrier has the right to inspect the damaged freight. Furthermore, the carrier has the right to take ownership of and salvage the freight if full claim value is awarded. Getting rid of the damaged freight may result in the claim not getting fully paid, or denied altogether.
The carrier has a right to salvage. If the product won’t keep or other laws require disposal the carrier needs to know this. There are laws outside of transportation that trump the carrier’s right to salvage. This is usually found only with food and hazardous materials.
There is a responsibility on all parties (shipper, carrier, consignee, freight/transportation logistics provider) to do what is reasonably necessary to mitigate the amount of potential freight damages. The root word of knowledge is know. How will you ever really know what is causing your freight damage claims, and the best way to mitigate those claims, if you don’t have a way to collect, catalog, and analyze your data? The answer is you won’t truly know, you’ll just guess. That guess can mean you may favor a mediocre carrier over an A-rated one, or alienate your best carrier when it is actually your company that has a problem at a DC or with packaging.
The Carmack amendment requires all parties to mitigate in good faith. If you mitigate before filing you may have problems in negotiations of the settlement. File for full cost of the freight when the carrier acknowledges the claim then mitigate.
4. Pay the Freight Charges
The same regulations which outline the timeline for valuation of a claim, also states that this filing must be accompanied by a copy of the paid freight bill. Not paying the freight bill, even though you feel the carrier is at fault, can work against you when attempting to resolve the claim quickly. It will save you much headache in the future to simply go ahead and pay the freight bill as soon as possible. Always take the higher road when it comes to claims. Pettiness will get you nowhere.
5. Understand the Bill of Lading
The Bill of Lading is the contract of carriage when there are no other contracts between the shipper and the carrier. Also terms (Such as FOB or COD) determine ownership of the goods when damage occurred. Any load that crosses state or international borders is governed by USC49 known as the Carmack amendment. The claims section of the NMFC (for LTL) doesn’t contradict the Carmack Amendment.
Most contracts will set U.S.C. 14706 as the standard to resolve claims disputes.
Freight claims laws vary widely from province to province and state to state. Additionally, claim law is dramatically different when going across borders to either Mexico or Canada. From a liability amount and a notice period, Canada and United States rules differ considerably. You must remember the point of origin dictates the jurisdiction from which the claim will be settled.
This is also the same for shipments moving to or from Mexico. For example, for a freight shipment being picked up in Canada which will be delivered to a consignee in Mexico, if there is freight damage or the freight was lost, Canadian claims law will apply in the resolution process.
6. File the Freight Claims ASAP
The Carmack Amendment specifies the following time line: Carrier must acknowledge a claim within 30 days of initial filing. A final disposition must be given in writing within 90 days. The claimant has 2 years and 1 day to dispute that finding. The sooner you file the sooner this time line starts.
U.S.C. 14706 does not specify a 9 month limit. Those are always by tariff or contract. What USC actually says is you cannot enforce a time limit less than 9 months to file a claim. If the carrier is a contract carrier and does not publish a tariff and you have no contract specifying the 9 month limit you have no restriction on filing a claim according to U.S.C. 14706. A judge may uphold a 9 month time bar as an industry standard but it is not the law.
There are many differences in the amount of time you are allowed to file the notice you have intention to file a formal claim to a carrier between the United States and Canada. If you file a claim after this period, the the claim will automatically void. For reference, the following time limit to file a claim for Canada and the US are:
- Canadian Bills of Lading – 60 days from delivery or within 9 months in the case of failure to make delivery
7. Know the Maximum Freight Claims Liability Amount
In both Canada and Mexico the carrier is liable in the claim for fixed monetary base amount per kilogram or pound, unless prior to the freight shipment, the carrier agrees to a higher amount through a “declared value” stated on the Bill-of-lading. The following are the fixed monetary base amount per pound:
- Mexico 2.8 cents US per pound
- Canada $ 2.00 CAN per pound
In the United States, the carrier is liable for the actual value of the shipment if the freight is lost or damaged, unless prior to the shipment, the shipper agrees to a lesser value. The release value is set by a common carrier’s tariff or by how the freight is classified under NMFC. One of the common conflicts arise when goods are used or refurbished the value typically drops to 10 or 15 cents per pound
8. You Cannot Profit From Freight Claims
The value of freight damage awarded is dependent on a number of variables. One of which is the transfer of ownership of the freight being shipped. Careful consideration must be given to the point at which the title to the freight is transferred. If manufacturer A produces and shipped freight to Distributor B and under the terms of their agreement holds title to the freight until completion of the delivery, then, if there is a damaged claim, the value of the freight damages will be limited to the manufactured cost of the goods and not the selling price. If on the other hand Distributor B took possession of the freight at the dock of manufacturer A and arranged for shipping, then if there was claims, the value of the claim would be the purchase price of the goods from Manufacturer A.
Improper handling of freight claims can be very expensive, time consuming and frustrating and should be avoided if possible. The more knowledgeable you are about the ins and outs of the claims process, the better equipped you will be to resolve the matter without having to resort to a the courts. Sometimes having an expert in the background ready to provide a helpful tips or simply having someone who you outsource your freight management to handle your claims, can really be the way you have peace of mind when it comes to not losing time or money spent on freight claims.